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MUTUAL FUNDS

MUTUAL FUNDS

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MUTUAL FUNDS

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  1. MUTUAL FUNDS GROUP MEMBERS: Ashley Smith, Anissa Patterson, Alyssia Fernandez, Dacota Holder, Dakota Webb, Jonathan Brooks, and Thomas Melton

  2. Stock Mutual Funds: Sell shares to individuals and invest the proceeds in stocks. • Bond Mutual Funds: Sell shares to individuals and invest the proceeds in bonds. Background on Mutual Funds

  3. Net Asset Value • NAV: the market value of the securities that a mutual fund has purchased minus any liabilities owed. • The NAV is commonly reported on a per-share basis by dividing the NAV by the number of shares in the fund.

  4. Open-End Versus Closed-End Funds • Open-end fund: sells shares directly to investors and purchase those shares whenever investors wish to sell them • Closed-end funds: issues shares to investors when the funds are first created, but do not re-purchase shares from investors.

  5. Load versus No-Load Funds • No-Load mutual funds: sell directly to investors and do not charge a fee. • Load mutual funds: charge a fee when you purchase them

  6. Types of Stock Mutual Funds • Growth funds: focus on stocks that have potential for above average growth. • Capital Appreciation Funds: focus on stocks that are expected to grow at very high rates. • Small Capitalization Funds: Focus on firms that are relatively small. • Mid-Size Capitalization Funds: focus on medium size firms.

  7. Types of Stock Mutual Funds (cont.) • Equity Income Funds: focus on firms that pay a high level of dividends. • Balance growth and income funds: contain both growth stocks and stocks that pay high dividends. • Sector Funds: focus on stocks in a specific industry. • Index funds: Mutual funds that attempt to mirror the movements of an existing stock index. • International stock funds: focus on firms that are based outside the United States. • Socially Responsible Stock Funds: screen out firms viewed as offensive by some investors.

  8. Types of Bond Mutual Funds • Treasury Bond Funds: focus on investments and treasury bonds. • Ginnie Mae Funds: invest in bonds issued by the government national mortgage association. • Corporate Bond Funds: Focus on bonds issued by high quality firms • High- Yield Bond Funds: focus on relatively risky bonds issued by firms that are subject to default risks. • Municipal Bond Funds: invest in municipal bonds, attractive to investors and high income tax brackets • Index Bond Funds: are intended to mimic the performance of a specified bond index • International Bond Funds: bonds issued by non U.S. firms.

  9. Return and Risk of Mutual Funds Dividend Distributions: A mutual fund that receives dividend payments must distribute these dividends to its investors in the same year. Capital Gain Distributions: a mutual fund that realizes capital gains as a result of selling shares of stocks or bonds must distribute those capital gains to its investors in the same year. Capital Gain from redeeming shares: You earn a capital gain if you redeem shares of mutual fund when the share price exceeds the price at which you purchased the shares Capital Gain= (selling price per share-purchase price per share) = ($30-$25) X $200 =$1000